Alphabet (GOOGL) and Reddit (RDDT) compete in digital advertising market, both expected to benefit

From Nasdaq: 2025-04-10 15:00:00

Alphabet (GOOGL) dominates the digital advertising market, while Reddit (RDDT) is a rising challenger. Both benefit from AI and machine learning in content creation and personalized user interactions. However, macroeconomic challenges post-tariffs may impact digital ad spending. Despite this, GOOGL and RDDT stocks are expected to benefit from growing digital ad spending.

Alphabet is projected to generate over $200 billion in global digital ad revenues by 2025, with Google and YouTube driving growth. Google’s ad revenue comes from various sources, including Google Search & other, YouTube ads, and the Google Network. RDDT, on the other hand, has shown strong user growth and improved advertising performance, with advertising accounting for 91.2% of its revenues in 2024.

Both GOOGL and RDDT have seen positive earnings estimate revisions for 2025, with GOOGL trading at a lower Price/Sales ratio compared to RDDT. While Alphabet’s ad growth may slow down, Reddit’s expanding advertising business and user experience enhancements make it a strong pick.

In terms of valuation, both Alphabet and Reddit are considered overvalued, with Alphabet trading at a lower forward 12-month Price/Sales ratio. Despite this, Reddit’s prospects for growth in advertising and user experience improvements make it a favorable choice compared to Alphabet.

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Read more at Nasdaq: GOOGL vs. Reddit: Which Digital Advertising Stock is a Better Buy?